Borrowers Scramble for Student Debt Relief Details ​​​

President Joe Biden’s announcement that he will cancel up to $20,000 in federal student loans for qualified borrowers is leaving many borrowers facing challenges related to its implementation, Bloomberg News reported. Many borrowers are likely to treat the process with urgency given that a pandemic-era freeze in student loan repayments is set to expire in January. More than half of those who qualified for forbearance haven’t made a student loan payment in nearly three years after the Trump administration first paused them in March 2020. Biden opted to extend the policy several times amid economic uncertainty. Education Secretary Miguel Cardona acknowledged the uphill battle on Sept. 7, saying the department is trying to “simplify” processes so people aren’t overwhelmed when they apply. “We have a dedicated team at the Department of Education that is working closely with the White House, leveraging the expertise gained from past implementation efforts, and meeting daily to implement the student debt relief plan,” a Department of Education spokesperson said in a statement. The majority of the roughly 43 million borrowers who qualify for relief will need to fill out an online application form beginning in early October to verify their incomes to prove their eligibility. Once complete, those applications will take four to six weeks to process, the Department of Education has said. (The department already has income information for some 8 million borrowers, whose relief will be automatic.) That makes for something of a race against time for the government to spread the word about the program and for consumers to take advantage of it: Borrowers should complete forms by November 15 so they are processed before loan payments resume in January, according to an infographic tweeted by Cardona.
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Fewer Americans File for Jobless Benefits Again Last Week​​​

The number of Americans applying for unemployment benefits fell again last week to a four-month low even as the Federal Reserve continues its aggressive interest rate cuts to bring inflation under control, the Associated Press reported. Applications for jobless aid for the week ending Sept. 10 fell by 5,000 to 213,000, the Labor Department reported Thursday. That’s the fewest since late May. The four-week average for claims, which offsets some of the weekly volatility, fell by 8,000 to 224,000. The number of Americans collecting traditional unemployment benefits inched up by 2,000 for the week that ended Sept. 3, to 1.4 million.
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Challenges Related to Bankruptcy Confirmation, Committees, Ethical Considerations and More to Be Discussed at ABI's Views from the Bench Program on Sept. 23​​​

ABI’s popular Bankruptcy 2022: Views from the Bench program will take place on Sept. 23 in the Washington, D.C., offices of Hogan Lovells US LLP. The program features the views of 24 sitting and retired bankruptcy judges. This year’s program will examine challenges related to bankruptcy confirmation, committee formation, ethics and much more. G. Eric Brunstad of Dechert LLP (New Haven, Conn.) will be the featured luncheon speaker during a conversation on recent Supreme Court developments. Attendees have the chance to earn up to 6 hours of CLE credit and 1 hour of ethics. Click here to register! 

CFPB Study Details the Rapid Growth of “Buy Now, Pay Later” Lending​​​

The Consumer Financial Protection Bureau (CFPB) published a report today titled, "Buy Now, Pay Later: Market trends and consumer impacts," finding that the industry grew rapidly during the pandemic, but borrowers may receive uneven disclosures and protections, according to a CFPB press release. The five firms surveyed in the report originated 180 million loans totaling over $24 billion in 2021, a near tenfold increase from 2019. “Buy Now, Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards,” said CFPB Director Rohit Chopra. “We will be working to ensure that borrowers have similar protections, regardless of whether they use a credit card or a Buy Now, Pay Later loan.” Once a niche financial offering that was heavily concentrated in apparel and beauty, Buy Now, Pay Later has now branched out to industries as disparate as travel, pet care, and even groceries and gas. Apparel and beauty merchants, which had combined to account for 80.1% of originations in 2019, only accounted for 58.6% of originations in 2021. Read more.

In related news, Democrats on the Senate Banking Committee see the specter of the 2008 financial crisis in emerging technology-based lending products that lack the consumer protections applied to traditional forms of credit, including buy now, pay later services, Roll Call reported. Sen. Mark Warner (D-Va.) warned that unregulated financial products have migrated from the commercial to the retail sector since the last crisis. The lead-up to 2008 was characterized by the proliferation of asset-backed securities and collateralized debt obligations, but now it's the rise of consumer-focused fintech services, including buy now, pay later and advanced-paycheck products, he said at a Senate Banking hearing Tuesday. “We've seen now a migration in the nonregulated part of the financial industry. A massive amount of new consumer products [have] come up in this area,” Warner said. “Some of these things bring real benefits, but I think we focus sometimes almost exclusively on the benefits and not on some of the challenges. The truth is I think there are reasons that we have regulated financial institutions and with that regulation, while there are burdens, there are also some benefits.” Buy now, pay later products rose in popularity during the pandemic as lockdowns drove consumers online. Spending through the products grew 230 percent from January 2020 to September 2021, according to a study commissioned by buy now, pay later provider Afterpay. Ranking Republican Patrick J. Toomey (R-Pa.) said regulating the products too quickly or stringently would stifle innovation and hurt consumers. He applauded the products for providing credit to people often left behind by traditional lenders, including low-income and young people. Read more. 

​​For more on BNPL services and bankruptcy, don’t miss the "Buy Here/Pay Here, Buy Now/Pay Later, and Missing Collateral" consumer session at ABI and UMKC School of Law's 2022 Midwestern Bankruptcy Institute, being held Oct. 6-7 in Kansas City, Mo. For more information, please click here.

Senate Banking Committee Grills SEC's Gensler over Climate Rule, Crypto Stance​​​

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler today defended his agency's position on cryptocurrencies and its push to include climate risks into public company disclosures before the U.S. Senate Banking Committee, Reuters reported. Gensler appeared before the panel for its regular oversight duties, but the hearing comes at a time of Republican frustration over his agenda. They claim that he has overstepped his authority with a broad assault on U.S. capital markets and adopted a hostile stance toward the financial industry. But in prepared testimony released ahead of the hearing, Gensler insisted his new rules are critical to ensuring the U.S. capital markets remain the global "gold standard." Republicans are especially concerned about a draft SEC rule requiring public companies to disclose climate-related risks, including greenhouse gas emissions. Corporate groups say it is onerous and exceeds the agency's authority. But Gensler, in his testimony, said the rule would provide needed clarity and consistency to an issue important to investors and being disclosed by some companies under disparate frameworks, and later added that the agency was considering all feedback. Republicans also pressured Gensler on what they see as his increasingly hawkish stance on cryptocurrency oversight. Gensler made headlines last week when he said crypto companies may need multiple SEC registrations and split their operations into separate legal entities. Gensler said such "disaggregation" could enhance investor protections and guard against conflicts of interest. He added that SEC staff was working with traditional market intermediaries interested in entering the crypto market, and urged Congress to not inadvertently undermine existing investor protections while crafting cryptocurrency legislation.
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CFPB Director Defends Regulatory Tactics​​​

The director of the U.S.’s consumer financial regulator is pledging to push ahead with regulatory actions targeting banks, credit card companies and the student loan industry, days after a group of Republican senators accused the Biden appointee of straying outside the bounds of the agency’s authority, the Wall Street Journal reported. Rohit Chopra said yesterday that, among the items on its agenda, the Consumer Financial Protection Bureau would continue looking broadly at how the agency can tackle what it views as problematic fees banks and credit card companies charge for overdraft transactions and late payments. The CFPB’s actions on what Chopra has termed “junk fees” is one of several that have provoked the ire of conservative lawmakers, who in a letter on Monday said that the agency was waging a “smear campaign.” Chopra responded to the letter, saying that he was optimistic the agency could find bipartisan support for its work on such hot-button topics as the regulation of big technology companies. The CFPB director has acknowledged taking an approach to the CFPB’s mandate that may set it apart from some of its regulatory counterparts. One of his strategies has been to deploy old or dormant provisions of long-existing laws and regulations in an effort to advance the agency’s policies. “The regulators of the past really missed some of the major issues that [consumer lending] markets were facing because many of them were more concerned about ensuring that banks were profitable,” Chopra said. “I think our singular focus has made sure that that is changing fundamentally.” (Subscription required.)
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SEC Proposes Clearing Reforms to Boost Resilience of $24 Trillion Treasury Market​​​

The U.S. Securities and Exchange Commission (SEC) yesterday proposed draft rules to increase the use of central clearing in the $24 trillion Treasury market in a bid to boost its resilience, Reuters reported. The proposals, which would apply to cash Treasury and repurchase agreements traded by a range of firms including broker dealers and hedge funds, follow liquidity crunches in recent years, which have raised regulatory concerns about the Treasury market's ability to function during times of stress. Most notably, Treasury market liquidity all but evaporated in March 2020 as COVID-19 pandemic fears gripped investors, prompting the Federal Reserve to prop up the market. Traders say they continue to see liquidity problems with some securities, Reuters reported last month. The SEC and other U.S. regulators have been exploring reforms to boost the market's resilience. If finalized, the SEC's reforms would mark the most significant changes to the Treasury market, the world's largest bond market (which is used to benchmark assets globally), in decades.
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Deadline Extended to Monday for All Submissions for ABI's International Committee  First Annual "Matter of the Year" Award​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. The nominations deadline has been extended to September 19, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

Two Upcoming abiLIVE Webinars to Examine Agriculture Business, Provide Outlook on Global Distressed Dealmaking​​​

Be sure to register for two upcoming abiLIVE webinars that will be examining key topics in insolvency:

The "Agriculture Business and Legal Basics" webinar, sponsored by ABI's Real Estate Committee on September 28, will present experts looking at issues in the agricultural industry to prepare attorneys, financial advisors and other professionals for future restructuring assignments in this unique space. Complimentary registration.

The "Global Trends and Outlook in Distressed Dealmaking" webinar, sponsored by ABI's Financial Advisors and Investment Banking Committee on September 30, will feature advisors based in Colombia, London, New York and Singapore sharing their experiences on how distressed deals are closed, along with their insights and predictions on what the deal market will look like going forward, and how rising costs, inflation, interest rates and volatility in the capital markets globally may impact the deal space. Complimentary registration.

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